As I recall, there were many companies in the U.S. back then who were poorly run. They had large amounts of cash on hand with dwindling business prospects. Companies like Bain looked for these companies who had a good product but bad contracts (unions?)renegotiated debt and contracts to become more competitive. If they were unsuccessful they liquidated which, in street parlance means they called the bluff of Unions, etc., and made money or lost money for their efforts. Gov. Scott Walker did much the same in Wisconsin.

Does intellectual argument trickle down? If, for example, the WSJ points out the logical fallacy of an Obama talking point, and the Professor and others re-tweet it, so to speak, then does the argument proliferate in ways that become easier for less intellectually sophisticated voters to understand and agree with?

I think part of the on-going small-d democratic experiment is the assumption that the answer to the above is "yes".

So... Cory Booker says ads like Obama's against Bain Capital are "nauseating" on Meet the Press and then a few hours later he's on youtube walking back what he said. They are calling it a "hostage video". You can see write-ups at Hot Air and/or Mediaite. Hilarious!

1) If a company like Bain made money for it's investors, that doesn't count because it's investors are in the 1% (i.e., there are fewer voting investors than there are employees).

2) If by risking the capital of its investors, a company saves the jobs of employees who otherwise would have become unemployed as their companies failed, that doesn't count because employees are entitled to their jobs and preserving them is simply maintaining the status quo. Also see 1.

3) Investors don't create jobs. Only the government creates jobs. On the other hand, investors destroy jobs.

4)Any company that doesn't preserve the jobs of all of its employees is evil. The government always preserves the jobs it creates, no matter how much money it costs.

In socialism you make yourself better off by hitting the other guy on the head and taking his stuff.

Short version: Socialism is Theft!

This has to be shouted from the rooftops until it gets through to the great majority, who have been saturated with the big lie that socialism equals compassion. The first step is to rid the term of its halo. The first step away from serfdom.

- Vulture Capitalist - Funny underwear (now that NYT has done the"thoughtful" 5000 word piece we can have the more substantial conversation about "the garment")- Flip flopper . We'll have to wait for coverage of BO's "evolution" on SSM to die down before that can be used again.

And of course we'll see the continued "spaghetti on the wall" approach to distraction issues such as War on Women.

"If the Obama campaign's critique made sense... it wouldn't make sense."

The "Life of Julia" slides show the same ignorance. All of socialism is predicated on government subjects believing that they will get out of the economy more than they put in, because -magically- Someone Else will pay for it.

That it never works and never has worked is of no consequence to its True Believers.

I wish atheists would show more concern for the belief in government than the belief on God; the former has proved far more damaging than the latter.

Jim Cramer on Bain: "They fired a lot of people and that's how they got prosperity for the rich." Just ask the Dade International employees, who had a successful company, what happened to them. Really it is not that difficult to understand, no need to take an econ class.

Jim Cramer on Bain: "They fired a lot of people and that's how they got prosperity for the rich."

Another example why people are idiots to listen to Cramer's advice.

Just ask the Dade International employees, who had a successful company, what happened to them.

You mean the company that sold in 2007 for 16 times its 1994 value? It was going bankrupt no matter what happened. Bain made it valuable and allowed them to overcome the 2002 bankruptcy to become, obviously, insanely valuable.

When you don't have any of your own skin in the game, it is only natural that you are going to make bad decisions. Here, Obama, et al., were spending OPM (other people's money), and so had no incentive to make good investment decisions, and so seem to have made such based on crony capitalism instead of probability of ever making a profit.

You can see this esp. when Obama talks about gambling with our money - no wonder so many of his "green" bets failed - if they were good investments, they wouldn't have been lined up for federal subsidies and bailouts. Or, to reverse this - they needed the government money "investments" because they had already failed the market test. MBAs, like Romney, had already looked at those "deals" and had passed on them. It wasn't because the MBAs were too stupid, but, rather, that they were too smart, and the government bureaucrats, spending OPM, weren't smart enough. Which is why they had to take the OPM at gun point to "invest" in these risky schemes.

What must always be remembered is that hard work means little, when the effort is wasted. A lot of these problems are structural.

So, maybe you are willing to work hard an extra hour or two at an outmoded steel plant. Still isn't going to turn it profitable, when the overseas competition has much more efficient plants, and much lower labor costs.

It is at this point, that maybe the best answer is to divert the resources in that failing business in a more profitable direction. And, if the failing business in an uneconomic sector is propped up, that often just means spending money to hold off the inevitable a bit longer.

Are you against venture capitalism in general or just how it was done by Bain? Creative destruction helps the economy by improving productivity. Sometimes you have to get rid of part of a company to save the rest of the company, think of it as surgery to remove a cancerous tumor. No individual job is sacrosanct. As you lefties say, you can't make an omelette without breaking some eggs.

Romney and his Bain Capital team have been amazingly successful because they were very good at recognizing under performing companies and poorly allocated resources, figuring out how to correct the problems, and getting the job done.

BTW, Cramer is a lefty and it is a prez election year so calibrate what he says accordingly.

Anytime you get rid of a poorly performing part of a company thus improving profitability, the company owners (probably rich) are going to benefit and whatever workers lost their job are going to be hurt. The alternative is to not fix the problems and run the whole company into the ground thus putting everybody in the company out of work.

I think all those people hailing "creative destruction" - go talk to the widow of a laid off middle manager who committed suicide that her husband was "creatively destroyed". Yeah I double-dog dare ya.

Alex said..."I think all those people hailing "creative destruction" - go talk to the widow of a laid off middle manager who committed suicide that her husband was "creatively destroyed". Yeah I double-dog dare ya."

Her husband was not creatively destroyed, his job was. There will always be lots of sad anecdotes but statistics trump anecdotes. A key economic objective has to be the creation of lots of good jobs. Without creative destruction our economy will stagnate and decline. Creative destruction is absolutely essential to a healthy economy.

For example, solid companies often screw up by making unwise acquisitions that are not in their core competence. The CEO and the board who made the mistake may not be willing to correct the mistake. A venture capitalist is less emotional and is willing to sell the unwise acquisition to another company who can more profitably manage it. Win win.

These venture capitalists are some of the smartest guys in the world and make a huge contribution to our economy by properly allocating resources. The lefty approach of crony capitalism and having the government make these decisions is grossly inefficient, corrupt, and puts us on the slippery slope to fascism.

"I think all those people hailing "creative destruction" - go talk to the widow of a laid off middle manager who committed suicide that her husband was "creatively destroyed". Yeah I double-dog dare ya."

Alex was is a key organizer in the upcoming benefit concert, Slide-Rule Aid.

My point is it's easy to talk about "creative destruction" when you're not the one being destroyed. Tell it all those millions of laid off factory workers. Tell them how for the sake of a "better future" their jobs had to be destroyed.

Chip S. said...go talk to the widow of a laid off middle manager who committed suicide

I'll get right on it.

What's her name and email addy?

5/21/12 11:17 AM Scott M said..."I think all those people hailing "creative destruction" - go talk to the widow of a laid off middle manager who committed suicide that her husband was "creatively destroyed". Yeah I double-dog dare ya."

Alex was is a key organizer in the upcoming benefit concert, Slide-Rule Aid.

Tell it all those millions of laid off factory workers. Tell them how for the sake of a "better future" their jobs had to be destroyed.

This is hilarious coming from someone wrapping himself in the mantle of "statistics" and calling for new job retraining programs.

As many as one million manufacturing jobs remain unfilled nationwide, according to a study by the accounting firm Deloitte and Touche. The gap is blamed on a shortage of skilled workers, which is where retraining programs like Michigan Works! come in.

That may be true but the key point is that creative destruction is a must for a healthy economy that creates lots of jobs. Venture capitalists provide a valuable service for our economy. It isn't their job to retrain workers.

If you want to make it easy for a company to hire a worker, you have to make it easy for them to fire a worker. We put way too many burdens on companies that end up depressing job creation.

I think that vulture capitalists have a moral obligation to think about all the jobs they will be destroying and account for that. They don't exist in a vacuum, our society created all the infrastructure(roads, banking, telecommunication) for them to become wealthy in the first place. It's time they gave back, instead of just take, take take.

Alex said..."I think that vulture capitalists have a moral obligation to think about all the jobs they will be destroying and account for that. They don't exist in a vacuum, our society created all the infrastructure(roads, banking, telecommunication) for them to become wealthy in the first place. It's time they gave back, instead of just take, take take."

No, they should focus on doing a good job of allocating resources because that is extremely valuable to the USA. They also give back by paying taxes.

It is critical that we put as few burdens as possible on the job creators so that they are free to create more jobs.

I think all those people hailing "creative destruction" - go talk to the widow of a laid off middle manager who committed suicide that her husband was "creatively destroyed". Yeah I double-dog dare ya.

It's sad, of course.

Horse carriage manufacturers were hurt, badly, by the car. Yet the car industry ended up employing far more than the horse carriage industry ever did.

I think that vulture capitalists have a moral obligation to think about all the jobs they will be destroying and account for that.

This debate clearly illustrates the difference between lefty and conservative thinking. Lefties tend to think of the economy as a static thing where the focus should be on government making a fair division of the goodies.

Conservatives tend to realize that the economy is very dynamic with huge potential for growth and that it requires a very flexible, intelligent management response that is not compatible with government interference.

Alex, fuck your "moral obligation." A corporation has only one obligation, and that is to it's shareholders, and if privately held, to it's owners. Jobs are a byproduct of business success. There is no moral obligation of any sort for anyone to give you a living. That is your responsibility and obligation. If it crashes and burns, too fucking bad. Figure out what you can do and get on with your life.

But mostly, Alex, you're being the annoying little troll you always are. You have absolutely nothing of consequence to offer except the random amusement of you making an ass of yourself as you contradict your way through the comments of this blog.

As I understand LBOs, the part of the article freely available is really stupid. The thievery which occurs in leveraged buyouts is against the shareholders who are left with shares after the buyout takes place, as well as against prior bondholders of the raided company. The raiders who buy out a company don't buy all the shares, just enough to gain control. They have borrowed much of the money to gain control of the company, and after they gain control, they can raid the company, forcing the company to issue bonds or sell much of its assets so as to pay dividends for the raiders to back what they borrowed. If the company bought out can handle the stress and increased susceptibility to bankruptcy, the raiders, those that loaned money to the raiders, and those who bought the bonds (especially the riskier junk bonds) can make much money; but the other shareholders, i.e., the shareholders who weren't bought out, would have in all likelihood made more money otherwise. If, as frequently happens, the company bought out can't handle the extra stress of increased debt or forced cutting, then the loss that occurs from the LBO can be substantial--however, when the company goes into bankruptcy, the other shareholders get wiped out along with those who have raided to get the controlling stake, sharing the loss. In other words, when an LBO happens, except I suppose in a few rare instances where the previous management was remarkably incompetent, the non-controlling shareholders who don't sell out lose and get raided.

Anyway, what raiders raid is the shareholders who still own a stake in the company after the buyout has taken place, along with the original bondholders of the raided company; if the company succeeds or fails, it's pretty much lose-lose for the first and neutral-lose for the latter. If the company goes bankrupt, the financiers loaning to the raiders can still get largely paid off, because the loans taken by the raiders are collateralized by the assets of the acquired company, so its win-neutral or win-slightly lose for them. The junk bond holders would mostly lose out, but that's the calculated risk they take--win-lose. The raiders probably will lose somewhat if the acquisition goes bust, but they won't lose nearly as much if they had put up all the money themselves, because the loans they have taken to mostly finance buying the company are not recourse to them, but are collaterized by the acquired company, which is owned not only by them but by the shareholders who didn't sell out. For cunning raiders who are skilled at accumulating the stock without paying much or any premium it can be a big win/small loss game. Any zero-sum game that is a lose-lose or lose-neutral game for some on balance must be on average a winning situation for others. True, the game might not be a zero-sum game if it tends to make healthy profitable companies become worthless, but the gains of some of the Wall Street tycoons suggests it may be sufficiently close as far as raiders are concerned.

Why do companies allow themselves to get raided so easily? I guess because lots of shareholders are people who don't pay much attention to what is going on or are too lazy to vote proxies, or are institutional investors, e.g., pension funds and the like, that happen to be controlled by people who don't understand what is going on or who can't be bothered to fill out proxy forms, etc., or who are bought out or influenced rather the way many politicians are.

Obama is so terrible I'll probably vote for Romney anyway, but I'm not at all happy about it. They both are probable disasters.

I think that vulture capitalists have a moral obligation to think about all the jobs they will be destroying and account for that. They don't exist in a vacuum, our society created all the infrastructure(roads, banking, telecommunication) for them to become wealthy in the first place. It's time they gave back, instead of just take, take take

No they don't, you insipid turd. I am no more entitled to my job than you are. I got it by working hard and proving that I have something of value to contribute to the company. If by chance my company is run by shitheads and a Bain capital comes in and fires me, well then it was way beyond my pay grade to control and I will try to move onto greener pastures. You and your 20th century bullshit thought processes still have you locked into the mindset that a job is a lifetime endeavor when it isn't. You are no more entitled to a job than I am.

And in all honesty, I'd say you are the vulture trying to use the lame Elizabeth Warren argument that success doesn't happen alone, that somehow the entirety of government largess in capital building projects is what makes people successful. Fuck you for being a moron. You couldn't be any dumber in even understanding the simple economy of success, as if somehow without government we couldn't be successful or thrive as business people. You stupid fool.

"If, as frequently happens, the company bought out can't handle the extra stress of increased debt or forced cutting,"

-- The problem is, in Bain's case, they are buying things that are failing to turn around. Without Bain's intervention they *will* fail. Bain doesn't simply buy healthy companies and ruin them, there's no profit in that (because of the time, effort and good will you lose along with money).

I think that vulture capitalists have a moral obligation to think about all the jobs they will be destroying and account for that. They don't exist in a vacuum, our society created all the infrastructure(roads, banking, telecommunication) for them to become wealthy in the first place. It's time they gave back, instead of just take, take take.

The rich can only take by making somebody else better off. That's the reason that way of organizing life works.

Think third world for the alternative organizations.

You have thuggery and bribery as the two major third world choices.

Bribery would correspond to government action, and thuggery to union remedies. Both have effects nicely illustrated by the third world.

Where's the compassion in that?

The first rule to think about is:

1. Don't eat the seed corn.

Seed corn is capital.

Even though the rich have seed corn, you don't feed it to the poor.

It got to be capital by being extra.

People with extra are rich.

If they use their capital to make themselves better off, they put it aside to plant next year - which makes millions better off.

You're suggesting that it would be better to think of the poor instead.

You're not thinking of the poor next year, when millions are as a result starving instead of today's few.

Do you want to be rich? Think of a way to make others better off. Bear next year in mind.

roesch/voltaire said...Jim Cramer on Bain: "They fired a lot of people and that's how they got prosperity for the rich." Just ask the Dade International employees, who had a successful company, what happened to them. Really it is not that difficult to understand, no need to take an econ class.

"#1 - conservatives are tone deaf to the pain caused by the economic upheavals. They need to start showing some compassion in how they talk about this stuff."

Yes, because feeling the right emotions and saying the right words EMPLOYS PEOPLE.

What is the most compassionate response to someone hurting because they lost their job? Saying sad things or promoting business and fixing the economy, allowing for growth?

There is nothing at all compassionate about vilifying business or scapegoating those in a position to build business or develop resources. No amount of being emotionally appropriate creates a job or feeds a family. It only makes the person being appropriately emotional feel good about themselves. It's a hellish selfishness that puts any free-market self-interest in the light of divinity in comparison.